Fiber to the Home is “Broadband Platform of Choice” Broadband access in general, and fiber networks in particular, continue to advance worldwide. Korea sets the pace: 93 percent broadband penetration, more than a third of which is FTTH.
FTTH Market Growing Fastest in the US; Asia-Pacific Leads in Market Penetration
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sia consolidated its position as the global fiber-to-the-home leader while the United States and Europe continued their robust growth, according to a ranking published by the FTTH Councils of Asia-Pacific, Europe and North America. The ranking, updated twice yearly and released most recently at the FTTH Council Asia-Pacific’s Conference and Exhibition in Kuala Lumpur, tracks the level of FTTH market penetration in the 14 economies where more than 1 percent of households are connected directly into high-speed fiber networks. South Korea, Hong Kong, Japan and Taiwan now occupy the top four positions in the ranking, and Asia now accounts for more than 27 million of the world’s estimated 32 million fiber-to-the-home connections. South Korea now has nearly 37 percent of its households connected to fiber, with Hong Kong at 27 percent, Japan at 24 percent and Taiwan at 7.7 percent. And while mainland China ranked 11th in market penetration, its 7.5 million connections make it second only to Japan in the number of households with FTTH. Sweden, Norway, Iceland, Denmark and Slovenia occupied the fifth through ninth positions in the ranking, with market penetration ranging from 7.5 percent to 3.2 percent. The Netherlands and Italy were in the 12th and 13th positions, each with market penetration of 1.4 percent. In all, European countries reported 1.4 million FTTH connections. Joeri Van Bogaert, President of the FTTH Council Europe, noted that large FTTH projects now underway in France and Germany, as well as deployments in other EU countries such as Greece and Portugal, will likely affect the rankings in the near future. The United States is third among the world’s economies in the total number of FTTH households at 3.3 million, and is
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in 10th position in the global ranking with 2.9 percent market penetration. The US continues to experience the highest rate of growth of any economy in terms of FTTH subscribers – doubling the number of connections year over year. This is due largely to an aggressive FTTH deployment by market leader Verizon and to ongoing buildouts by more than 600 smaller providers across the country. “Clearly North America, and particularly the United States, has crossed the chasm and is now moving decisively toward fiber to the home as the broadband platform of choice,” says Joe Savage, President of the FTTH Council North America. “Aggressive FTTH deployment in the US has created a lot of buzz about this exciting technology, and the word of mouth from early FTTH subscribers is driving growth and fueling further deployments.” See www.ftthcouncil.org for more information. BBP
| BROADBAND PROPERTIES | www.broadbandproper ties.com | August/September 2008
FTTH Market Turns to GPON
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he nascent GPON market posted healthy growth worldwide in 1Q08, driven by service provider investments in broadband access networks, according to communications market research firm Infonetics Research (www.infonetics.com). During the same period, BPON equipment sales declined significantly and EPON sales dipped, together bringing the overall PON market down 3 percent to $417 million worldwide in 1Q08. “Service providers increasingly turn to PON as the next generation of residential broadband access, primarily in areas where DSL service penetration has reached maturity and operators are looking to increase average revenue per
user (ARPU),” says Mark Showalter, directing analyst for broadband networks at Infonetics Research. Other report highlights: • Between 4Q07 and 1Q08, worldwide GPON manufacturer rev-
enue increased 33 percent and ports climbed 38 percent. • Alcatel-Lucent retained first place in worldwide GPON revenue through the quarter, followed ever more closely by Huawei. • In 1Q08 worldwide Ethernet FTTH equipment revenue fell 6 percent sequentially, but is expected to increase 75 percent by 1Q09 as operators in Asia continue using Ethernet in metro areas to connect apartment buildings and businesses. • The top 3 overall PON market share leaders maintained their positions in 1Q08, with Mitsubishi leading, followed by Tellabs and Hitachi. BBP
Gartner: Consumers “Addicted to Broadband”
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orldwide consumer broadband connections will grow from 323 million connections and 18 percent of households in 2007 to 499 million, or 25 percent of households, in 2012, according to research firm Gartner Inc. (www.gartner.com). Five countries – Canada, Netherlands, Switzerland, South Korea and Hong Kong – exceeded 60 percent broadband penetration in 2007; by 2012 Gartner expects 17 such countries, and some countries may even exceed 80 percent. The high penetration rates seen in countries such as South Korea, Hong Kong and the Netherlands demonstrate what is possible under the right conditions, Gartner says. Smaller, denser countries, as well as countries with government-backed spending for broadband infrastructure, have an advantage. As a result, by 2012, these countries will have maintained their lead in broadband penetration rates. “Broadband penetration will increase, especially in the geographically larger markets, as current broadband providers continue to deploy their services, as newer technologies (wireless broadband, such as WiMAX) attract
subscribers, and as users experience firsthand how speed enhances their Internet sessions,” says Amanda Sabia, principal research analyst at Gartner.
Not only will the digital divide continue between the emerging and mature markets, it will widen by 13 percentage points. Because the top three markets of
Markets with Highest Broadband Penetration of Households, 2007 and 2012 (Percent) Country
2007
2012
South Korea Netherlands Hong Kong Canada United States Japan Switzerland Singapore United Kingdom Taiwan France Australia Sweden Spain Germany Belgium New Zealand
93.0 74.0 76.0 65.0 54.0 54.0 69.0 57.0 58.0 59.0 58.0 52.0 58.0 54.0 49.0 55.0 43.0
97.0 82.0 81.0 79.0 77.0 77.0 76.0 75.0 74.0 74.0 73.0 72.0 69.0 68.0 68.0 66.0 64.0
Source: Gartner (July 2008)
August/September 2008 | www.broadbandproper ties.com | BROADBAND PROPERTIES |
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South Korea, the Netherlands and Hong Kong are already heavily penetrated, the change in penetration rates is minimal compared with markets such as the United States, Japan, Czech Republic, New Zealand and Australia. These markets will exhibit a swelling of broadband penetration by more than 20 percentage points. Growth in broadband adoption is dependent on specific market conditions, availability of Internet-enabled devices and the continued impact of broadband on consumer lifestyles. “Consumers in heavily penetrated markets are already addicted to broadband, thus the future in these markets is less concerned with increasing subscriber numbers, and more with addressing what new applications and/or content will be transmitted over this pipe,” Sabia says. “Newer ventures in these markets are primarily entertainment (such as Internet video content and games), IPTV and home networking, which will bring these devices and services into one integrated system within the home.” BBP
Markets with Highest Household Broadband Penetration, 2007 and 2012 (Percent) South Korea
97
82
Netherlands
81
Hong Kong
79
Canada
77
Japan
77
United States
76
Switzerland
75
Singapore
74
Taiwan
74
United Kingdom
73
France
72
Australia 69
Sweden
68
Germany
2012 2007
68
Spain
66
Belgium
64
New Zealand
40
50
60
70
80
90
100
US Broadband Numbers Rise, but the ‘Digital Divide’ Still Exists
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ifty-five percent of adult Americans now have broadband Internet connections at home, up from 47 percent last year, according to a new survey by the Pew Internet & American Life Project. Only 10 percent of Americans now have dial-up Internet connections at home, the survey found. But the survey also established that the “digital divide” is alive and well. Only 25 percent of Americans with household incomes below $20,000 reported having broadband at home in April 2008, down from the 28 percent reported in March 2007. African Americans showed slow growth in broadband adoption, with 43 percent saying they had broadband at home in April 2008, versus 40 percent who said this in March 2007. Groups adopting broadband more quickly included Americans aged 50
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and over, whose growth rate in home broadband adoption from 2007 to 2008 was 26 percent, and those with household incomes between $20,000 and
$40,000, whose broadband penetration grew by 24 percent in the same period. In rural America, where broadband options are fewer, 38 percent now have
| BROADBAND PROPERTIES | www.broadbandproper ties.com | August/September 2008
broadband at home – a growth rate of 23 percent from 2007 to 2008. By comparison, 57 percent of urban residents and 60 percent of suburban residents have high-speed connections at home now. About 15 percent of all American households are considered “rural” by the Bureau of the Census. One reason for increasing broadband adoption is that its pricing has become more favorable relative to dial-up. Broadband users reported an average monthly bill of $34.50 in April 2008, down from $36 in December 2005, while dial-up users reported monthly bills of $19.70, up 9 percent from $18 in December 2005. In addition, the price premium for cable modem service over
DSL service is dropping – $6 in April, compared with $9 in December 2005. When dial-up users were asked why they hadn’t subscribed to broadband, 14 percent (24 percent in rural America) said they were still waiting for broadband service to become available, 35 percent said the price of broadband service was still too high, and 19 percent said nothing could convince them to get broadband. Dial-up users are about half as likely as broadband users to say information technology or electronic devices make them more productive. Roughly one-quarter (27 percent) of adult Americans are not Internet users; these tend to be older (the median age is
61) and have lower incomes than Internet users. Although 18 percent of them have used the Internet at some time in the past, only 10 percent are interested in using it now. The WiFi-enabled laptop has, for many Internet users, added “always connected” wireless access to the “always on” broadband connection. Some 34 percent of Internet users have gone online via wireless in places such as airports or coffee shops. About 95 percent of these “on the go” WiFi users have a high-speed Internet connection at home, and they tend to do more online tasks on a typical day than the average broadband user. BBP
171 Million Broadband Subscribers in Asia-Pacific
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sia-Pacific’s broadband subscriber base is growing at an astounding annual rate of 31.5 percent, according to a new analysis from Frost & Sullivan (www.communicationservices.frost.com). From 129.7 million at year-end 2007, broadband subscribers will likely reach 171 million by the end of 2008, or a household broadband penetration rate of 19.7 percent. Frost & Sullivan estimates that Asia-Pacific broadband subscribers will reach 321.8 million by the end of 2013, with a household penetration rate of 33.7 percent. The surge in demand for broadband in the region, which covers 13 countries, is driven by the growing popularity of video on demand, multiplayer online games, video content sharing and social networking services, as well as the aggressive push by operators to offer bundled triple- and quadruple-play services. The total broadband revenues in Asia-Pacific stood at $28.1 billion in 2007. Frost & Sullivan projects a market size of $42 billion by 2013. F&S’ ranking of the top Asia-Pac countries is somewhat different from Gartner’s (see above), with estimated broadband penetration rates at the end of 2007 as follows:
New services like multiscreen IPTV with simultaneous recording will cause a “bandwidth explosion.” To get ready for it, Asia-Pacific operators are deploying fiber as close to the home as they can. • • • • •
South Korea - 90.8 percent Hong Kong - 83.8 percent Singapore - 73.1 percent Australia - 63.2 percent Japan - 57.8 percent
“As fixed-line substitution and voice migration to mobile continues, broadband value-added services become critical drivers for fixed-line service providers,” notes Frost & Sullivan senior industry analyst Yong Lih Khoo. “Operators are as such aggressively promoting attractive bundled and discounted price plans, encouraging migration from narrowband, introducing local content and innovative services such as IPTV, as well as overall improving service levels and affordability,” he adds. Government broadband master plan initiatives, particularly in the more developed nations, are also providing the impetus for the deployment of wider
network infrastructure and coverage, and the development of local broadband content and applications, thus driving broadband uptake. Khoo believes that a wide range of access technologies – FTTH, FTTN, FTTB, DSL, WiMAX and other wireless technologies – would continue to coexist, based on the strategic outlook of the operators, existing infrastructure and price points in a given country. He says, “Deploying fiber as close to the home as possible enables operators to be future-ready for the bandwidth explosion that new services like multiscreen IPTV with recording and the concurrent high speed Internet needs.” Khoo adds that in a credit crunch environment, most operators are likely to be cautious before deploying full-fledged FTTH even though it is a future-proof technology. BBP
August/September 2008 | www.broadbandproper ties.com | BROADBAND PROPERTIES |
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IP Transformation Fuels Telecom Equipment Growth
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ales of service provider and enterprise telecom and datacom equipment hit $139 billion worldwide in 2007, up 13 percent from 2006, and are forecast to grow 26 percent to $174 billion in 2011, says a new report from communications market research firm Infonetics Research (www.infonetics.com). The five-year compound annual growth rates for all segments tracked in the report range from slightly negative to strong double digits from 2007 to 2011, with IPTV and IP video equipment growing the fastest, followed by service provider VoIP and IMS equipment. “While service provider wireless and FMC [fixed-mobile convergence] equipment and enterprise routers, switches, and wireless LAN equipment make up
the largest portions of revenue, the increases we’re seeing in the overall telecom and datacom equipment market are being fueled by the transformation to IP packet networks, as evidenced by strong growth in the IPTV and service provider VoIP and IMS segments,” said Jeff Wilson, principal analyst at Infonetics Research. Other highlights from the report: • The largest equipment category, service provider wireless and FMC, will decrease its share of overall telecom/ datacom revenue by 4 points between 2007 and 2011, as fast-growing segments like IPTV and carrier VoIP and IMS gain share. • About a third of all 2007 telecom/ datacom equipment revenue came
Viewers are willing to pay subscription fees for online content – especially if “packaged goods” like DVDs are bundled along with it.
from the Europe/Middle East/Africa (EMEA) region. • China and India will drive a significant jump in carrier capital expenditures, or capex, in 2008 as a result of network construction projects combined with currency appreciation against the US dollar. • Cisco leads the overall worldwide telecom/datacom network equipment market in 2007, followed by Alcatel-Lucent and Ericsson. • Ericsson and Alcatel-Lucent are neck and neck as leaders of the service provider telecom/datacom equipment segment, while Cisco leads the enterprise segment with nearly half of worldwide revenue market share in 2007. BBP
Report Validates Netflix Subscription Model for Online Video
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he worldwide online video market is experiencing dramatic growth, reports In-Stat (www.in-stat. com). Worldwide online video revenue is expected to exceed $4.5 billion by 2012, up from $1.2 billion in 2008, the hightech market research firm says. Purchased or rented videos are expected to offer the most robust growth for online video in the near term, in large part due to an increase in subscription services such as Netflix, which charges a flat monthly fee to deliver an optimal combination of packaged goods and online content that can be viewed on home TV sets. Ad-supported professional video
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from major TV networks will become a strong revenue contributor by 2012. “What is now seen as a predominantly younger pastime will spread to encompass a wider group of people, in part due to the aging of current online video viewers, but also as a result of word of mouth, spread of services, growth of in-home networks, and new network-connected consumer electronic devices,” says Gerry Kaufhold, In-Stat analyst. “The survey data in a recent In-Stat report indicates that over half of consumers actually still prefer packaged goods, which bodes well for Bluray discs. Surprisingly, younger people who regularly watch online were the
group that expressed the highest interest in owning a package goods bundle that includes artwork and extra content.” Recent research by In-Stat found the following: • By 2012, 39 percent of adults in the US are expected to have purchased or rented online video. • 54 percent of respondents to an InStat survey of US consumers still favor physical discs when purchasing movies or TV shows. • By 2012, In-Stat forecasts that 90 percent of US households will have access to broadband, with 94 percent of these individuals watching online video. BBP
| BROADBAND PROPERTIES | www.broadbandproper ties.com | August/September 2008
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